Putin’s Fixers

The myth that Vladimir Putin wants to bring back the USSR persists, and with good reason. Putin’s intentions have a strong imperial whiff to them, illustrated in his apparent desire to reconquer some former Soviet republics—in his eyes, fake, half-legitimate states. Then there is his arrogance vis-à-vis what he views as inferior neighbors to the east, whose presidents’ names he doesn’t even bother to remember. Anonymous gossips with supposed ties to the presidential administration also claim that Putin is fond of his former KGB boss Yuri Andropov’s ideas. Andropov believed that entrepreneurship would do the Soviet people good, on condition of strict control, sobriety, and retention of all the socialist achievements.

These are valid arguments. Yet all of Putin’s other actions and values scream a hatred of communism—both the idea and the way it was implemented. Indeed, they suggest that he in fact worships capitalism.

Take, for starters, the laws adopted during Putin’s presidency.

When at the dawn of his presidency Putin achieved passage of the natural resource extraction tax through extensive lobbying efforts, the public applauded this populist move. The hydrocarbon profits, it seemed, would now flow back to the people.

It soon turned out, however, that the “superprofits” flowed in a different direction. Rather than helping to finance rural gas infrastructure projects and secure access to the sewage system, improve health care, and increase social benefits, part of the new hydrocarbon cash got stashed away in the Stabilization Fund. Other parts ended up as dividends and payments to Putin’s friends and the managers of their companies. Still others were used to strengthen the repressive state apparatus protecting the mobsters.

Then Putin introduced the flat income tax scale, claiming that this would unchain business and stimulate Russian people’s entrepreneurial G-spot. This framing helped sell the idea to citizens outraged by Russian oligarchs’ wealth: without these incentives, they were given to understand, businessmen would stop working hard, forestalling economic growth and the building of a shopping mall in every village—a feature which Russian newspapers so breathlessly extolled.

Finally, Putin introduced a simplified taxation scheme, which became a sort of absolution for the nascent middle class. The 6 percent tax on several million rubles’ worth of monthly business income did indeed stimulate entrepreneurship. Have you ever seen a “developed country” (Russian propaganda loves colonial clichés) where a regular entrepreneur making $100,000–$150,000 a month would pay just 6 percent in taxes? the Russian media exclaimed. No! Russian propaganda was right: in Russia it was indeed possible to legally become a dollar millionaire in a year.

Prior to the annexation of Crimea and the subsequent crash of the ruble, this scheme ensured political apathy: Russian citizens proved ready to forgive their government anything in exchange for such generosity. Many continue to forgive it everything even today, against a background of thundering tanks and missile strikes.

At this point one might interject: But what about health care? It’s still free, just as it was in the USSR. But there is a reason for that. The Russian mafia state uses free health care to buy the loyalty of the people. Putin would be happy to cancel it, and in the past he even took a few steps to promote private health care. But that would harm his interests, potentially strengthening public discontent and, in the case of mass protests, leading to a defenestration of top bureaucrats.

Aside from free health care, Russia no longer has any attributes of a social welfare state. In Russia, money decides everything. If you have it, you can buy whatever you need: groundbreaking medical services, information from classified databases, medals, promotions, favorable court verdicts, and access to top-ranking officials. Russia has a version of capitalism in which the pretense of regulation conceals the reality of an extreme survival-of-the-fittest free market. If you don’t have fixers who can solve problems for you, you are nobody. Even the most ardent anti-Putinists will, when a serious problem arises, turn to these fixers to get around the law. What is to be done, they sigh. This is the country we live in.

This sort of country and market served Putin well, turning business into a veritable feeding ground for the siloviki and bureaucrats, the pillars of his regime. The latter were permitted to use Russia’s business as they wished, to extort, exert control, and expropriate it as they needed. If the businessmen squabbled with one another, siloviki got paid again—this time to open and close court cases, lobby for laws and amendments, and rent out their corporate raid forces.  

The redistribution of property inevitably led to its concentration in the hands of “ours.” Over the past twenty years, startups, high-tech companies, and other more or less innovative businesses survived in Russia only because they stayed below the radar or quietly paid shakedown money. Russia’s capitalism turned from seemingly regulated to blatantly thuggish. Legally, businesses could take different forms, from state corporations to private companies, but in practice virtually everything in the country belonged to siloviki clans and Putin’s cronies.

More prudent entrepreneurs, such as the Alfa-Bank oligarchs, took their businesses out of Russia or sold them for an acceptable price, as did Sergey Galitsky, founder of Magnit, Russia’s largest retailer. Others were essentially nationalized or taken over by the siloviki. Some continue to play the role of their business’s nominal owners.

This is, then, what we have in practice. What about values? Here Putin looks altogether like a Godfather.

The bureaucratic atmosphere of the late 1980s, with its official resorts decorated in late-Soviet modernist style, indoor tennis courts, and imported East European furniture, was characterized by an entrepreneurial spirit that fed on the transition from state to private business models and corruption-friendly deals. Imported cars, VHS porn tapes, authentic jeans: money and connections were the keys to open the magic door into the capitalist Narnia.

Money and connections became the sacred values for the young perestroika functionaries. “Don’t overcomplicate,” the late-Soviet reality seemed to whisper in their ears. “Money is a great thing, and friends tied by money-making bonds are even better. Steal, but carefully. Capitalism is unfair, but armed and uniformed people will protect you from those who resent the unfairness. Just pay them and give them fancy cars and military regalia.”

Putin’s collaboration with the mayor of St. Petersburg, Anatoly Sobchak, further strengthened these convictions. All investigations into Putin’s activities in the 1990s indicate that he was a typical, quiet wheeler-dealer on the government payroll who knew how to do business and be a team player.

Incidentally, this “no bonds are holier than the bonds of friendship” notion, which demands that one defend a friend even if he is a scumbag, a rapist, a fascist, or a thief, has a downside. The notion implies that the sanctity of an amoral gangster brotherhood is above all else. Yet when one believes in nothing but money, friends start using and ultimately betraying one another. The idea that “we don’t sell out our own” turns out to be just a myth. They do sell out their own, retail and wholesale. Just think about Putin’s close buddy, Rosneft CEO Igor Sechin, luring his friend, Minister of Economic Development Alexei Ulyukaev, to his office and handing him a briefcase with marked bills.

Is it any wonder, then, that Putin built capitalism in Russia? We can debate as to what form of capitalism he’s built: a special subtype of mafia capitalism or the classical one from the Marxist point of view. But there is no doubt that it is a kind of capitalism that Darwin would have loved. Grow claws and fangs to make others fear you, and if someone refuses to fear, you always have a fixer who’ll take care of that for you.

What’s next?

With Ukraine going on the counteroffensive, Putin looks like a lame duck. But one unpleasant feature of autocracies is that such ducks can keep on limping for a long time before someone finishes them off: other residents of the animal farm need them as scapegoats (or scapeducks, as it were). But it is too late to break Putin’s rules: siloviki barons are doomed to continue squabbling and reclaiming property from one another.

They will do it in markets that are shrinking because of sanctions and recession. They couldn’t care less about political ideas, nostalgia for the Bolsheviks’ messianic state, or a return to communism. The only reason they care about Russia’s overt imperialist ambitions and references to Soviet glory is that these gestures help legitimize them in the eyes of the nation: look, we are heirs to an empire, the world respects us the way it once respected our Soviet tanks and missiles.

So wholeheartedly does Putin believe in the “every man for himself” paradigm that was once drilled into the minds of post-Soviet Russian people that if it were up to him, he would turn every Russian who is not a civil servant into an individual entrepreneur or a self-employed person. Let them move mountains for their 6 percent tax, learn to pay for health care, drink less and do sports, and in elections vote for the right people and not protest against the war. This is the citizen of Putin’s dreams.

It often happens that dreams come true, but not in the way one wanted. Instead, life adjusts them as it pleases.

This is what we have here. The politically spineless, apathetic citizen that Putin raised has turned out to be a crafty capitalist intent on personal enrichment. This capitalist doesn’t want to fight. Instead, he starts to energetically evade the government’s efforts to mobilize him.

The fixer who can take care of things is still there, but the apathetic-citizen-turned-capitalist has broken ranks.

The article originally appeared in Russian on Иными словами, a Kennan Institute Blog.

The opinions expressed in this article are those solely of the author and do not reflect the views of the Kennan Institute.